- Wall Street breaks record after record
- DE30 more hesitant
- Short term price actions favorable for buyers
Technical Analysis – positive short term signs
Following another record breaking session in the US the DE30 opened higher after Christmas but once again we saw that traders in Germany are way more cautious and profit-taking ensued quickly. We can see that previous breaks of 13300 were unsuccessful and led to smaller or larger profit takings but on the last occasion when the break took the form of a bullish gap (like today) we at least had another attempt before a larger profit-taking. Point for the bulls.
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Recent breaks of 13300 were short-lived and resulted in corrections. However, the latest one had at least a double top. Source: xStation5
On top of that, profit-taking from early-European trade saw a materialization of the short-term overbalance structure and we saw bulls reacting to this. That’s a bullish sign and could take the index to 13420 in the short term.
The overbalance structure suggests a test of 13420 points. Source: xStation5
So as we can see the short-term outlook is bullish and while this could eventually produce a break from multi-week triangle (which itself is a continuation pattern), traders will need to take this decision when/if price is above 13400 points.
Fundamental Analysis – where next for overpriced stocks?
Fundamentally traders have few reference points this week with the next report to watch being German retail sales on Monday. However, even this one will not answer one recent hot question: should the DAX follow a buying hysteria that we see on Wall Street? We can see that a simple overlay with the US500 would see the DE30 now well above 13700. But are the US stocks right to keep rocketing like this with sentiment and oscillator levels last seen in January 2018? That would really require a rapid global economic recovery as a justification and the incoming data should be judged in this perspective.
DE30 was firing up until mid-November but has resisted following Wall Street into buying frenzy since then. Source: xStation5
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